- It released version 3 of its automated market maker platform on BNB Chain and Ethereum.
- Liquidity providers will now be able to deploy capital at more granular pricing points.
PancakeSwap, a decentralized finance (DeFi) protocol, has released version 3 of its automated market maker platform on BNB Chain and Ethereum, which brings with it increased speed and decreased costs.
Liquidity providers will now be able to deploy capital at more granular pricing points, which will increase capital efficiency. Given that assets often move within specified ranges, the original PancakeSwap platform inefficiently dispersed liquidity from providers (LPs) equally around the price curve of trading pairs.
Several Improvements Over V2
With V3, liquidity providers may choose a precise price range within which to offer liquidity, giving them more say over where their funds are deployed in markets with larger trade volumes. The announcement also highlights the availability of four additional trading fee categories, from 0.01% to 0.05% to 0.25% to 1%, as an improvement above V2’s baseline of 0.25%.
Each possible token pairing may have its own liquidity pool. PancakeSwap’s method attempts to strike a compromise between traders aiming for the lowest costs and yet motivating LPs, with the expectation that asset pairings will be driven to tiers where incentives for both are aligned.
Stable pairings, for example, have an impermanent loss of less than 0.01% (price fluctuations after depositing to a liquidity pool), and their prices tend to be in sync with one another.
Trading fees as a proportion of trades are scaled up for assets with more volatility and lower liquidity. The goal of this approach is to increase fee income and incentives for liquidity providers. With over $2.5 billion in total value locked (TVL) and over 1.5 million active users each month, PancakeSwap serves a sizable portion of the DeFi community.
Recommended For You:
DeFi Project SafeMoon Exploited of $8.9 Million Post-Recent Upgrade
